Allahabad HC: Tax Form 10 Issued After Limitation But Before Assessment Fulfilment Has to Be Evaluated

Form 10 under Income Tax Rules, 1961 supplied after limitation but before completion of assessment has to be considered, Allahabad High Court has stated.

M/S Maa Bhagwati Shiksha Samiti, a registered society, obtained its registration (No. 1398/2005-06) under the Societies Registration Act, 1860, in Uttar Pradesh. Its primary objective revolves around charitable endeavours in education, conducting educational activities through its managed institutions. Additionally, it secured registration under section 12A of the Act on 25.09.2008, granted by CIT-1, Kanpur, vide certificate.

The petitioner society diligently maintained comprehensive books of accounts and related records, all subjected to audits under section 12-A(b) of the Income Tax Act, 1961 (‘the Act’). For the fiscal year in question, i.e., A.Y. 2013-14, it submitted its return on 31.03.2014, declaring zero income after availing exemption under section 11 of the Act.

However, due to a 17.02% shortfall (Rs.1,58,56,689/-) in overall utilization compared to the prescribed 85% limit, Form – 10, as stipulated by Rule 17 of Income Tax Rules, 1961 (‘the Rules’), was issued and filed with the Income Tax Department by 31.03.2014.

The petitioner society’s filed return underwent scrutiny, triggering a notice under section 143(2) dated 22.09.2014. This was followed by subsequent notices under section 142(1) of the Act, along with query letters and entries in the order sheet. Responding to the Assessing Officer’s raised queries, the petitioner submitted books of accounts, audited balance sheets, Form 10, and additional information for consideration.

Following a thorough verification process, Respondent No.2 issued an assessment order under section 143(3) of the Act, acknowledging the petitioner’s disclosed NIL income, duly taking into account the submitted Form 10.

The assessee submitted form 10 on March 31, 2014, for an unapplied surplus income of Rs. 1,58,86,689/, although it was filed belatedly for accumulating this surplus amount. This submission was made after the due date specified under section 139(1) of the Act, even though according to section 11(2), form 10 should have been submitted for accumulating income until the date of filing the return, which was due by September 30, 2013, under section 139(1).

Justice Siddhartha Varma and Justice Shekhar B. Saraf, as part of a division bench, noted that according to Rule 17, Form-10 should be submitted to the Assessing Officer before the assessment concludes. Even if Form-10 is submitted late but before the assessment’s completion, the assessee can still avail the benefits outlined in Section 11(2) of the Act.

The Court deemed the Department’s initiation of the entire reassessment process as baseless and lacking any legal foundation. Consequently, the Court nullified the notice issued under Section 148 of the Act, the order dismissing the petitioner’s objection dated March 3, 2022, and the reassessment order executed by the Assessing Officer on March 19, 2022.